And some results:
Fed holds rates steady - June 28, 2000 - CNN Money
Fed cuts discount rate, stands ready to do more - The mess that greenspan made
Fed Funds Target vs. Effective Funds Rate - Calculated Risk
The T-Bill Message for Bush & Bernanke - August 16, 2007 - Kudlow's Money Politic$
Some Wall Street Journal definitions:
How does the fed keep rates near its target? A primer - August 16, 2007 - WSJ
Explaining the Discount Window - August 17, 2007 - WSJ
And here's a result which may give a clue about what happens when the discount window is lower than the fed funds rate:
Economists React: 'Lifting the Wizard's Curtain' - August 17, 2007 - WSJ
"Prior to 2003, when the discount rate was lower than the funds rate, cutting the discount rate was the most powerful tool in the monetary policy toolbelt. Indeed, prior to 1994, when the Fed began announcing changes in the funds rate target, a discount rate move was the ONLY move that was explicitly announced. Many market participants will think of the discount rate cut in those terms, which is not the correct way to consider it. Instead, this should be thought of as another (indeed, probably the last) intermediate step short of an ease. –Stephen Stanley, RBS Greenwich Capital"
Bernanke's the new sheriff in town-- when he lowered the discount rate after Bill Poole said only a catastrophe would cause the Fed to change monetary policy earlier than their September meeting-- his actions showed his new tactics. Where Greenspan would have lowered the fed funds rate-- the famous Greenspan put, Bernanke may be reverting to the past, when the discount rate was more important.
Will Bernanke revert to considering the discount rate the most important rate? This is a new boss-- the Greenspan era is over-- no more Greenspan put, the book is out and he's coasting. Bernanke is an academic. He may not be in it for the short term like Greenspan. He may not want to be popular and enjoy the public eye. He's less impressed with his public image than his predecessor. It's not all about ego, but-- Greenspan enjoyed the limelight. He liked speaking in riddles and being the most powerful man on the planet. He didn't follow the advice of the group-- sometimes he lowered rates even if the others on the board didn't want to. He followed the Federal Express stock price to feel the pulse of the economy. He made instinctual decisions and most of the time he was right. Bernanke is an academic-- he listens to the group, he uses models. Most likely, he will not follow the historical pattern and make his mark today.
So, with 25 minutes to go-- will Bernanke raise the fed funds rate 25 basis points to 5.5% and lower the discount rate 50 points to 5.25%?
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